2014年07月30日

ileyard Studios is a nondescript and fairly hidden studio complex in London’s Kings Cross area. A microcosm of the creative industries the U.K. capital city is partly known for, it houses over one hundred companies spanning film and television, music, fashion, and “creative tech”. During the last 18 months, it has also been the home to LocalGlobe, the seed-stage venture capital firm founded by father and son duo Robin and Saul Klein, and one of the most active in the country cloud saas.

Since May 2015 alone, LocalGlobe has backed 45 startups, seeing £27 million invested in 38 companies in the U.K., with the majority in London. They cover multiple sectors including the creative industries, education, energy, fashion, finance, food, health, insurance, property, travel and transport. If there is an industry being impacted by tech, LocalGlobe has probably already left fingerprints on it.

At the invitation of Saul Klein, I’m here to interview him, his father and four other members of the now eight-person LocalGlobe team, none of whom I have met previously despite being one of the journalists who has covered the firm’s investments the most in recent years. Based on my own sources, I planned to break news of a new £75 million fund LocalGlobe closed late last year, but Klein had other ideas Korean skin care.

“That’s not a story that interests us,” he told me unambiguously when I called him for comment last month. He proposed instead that I visit LocalGlobe to meet with the team and find out what the VC firm is all about for myself. You could say that I blinked first.

The destination for our meeting is actually a few units further down from the LocalGlobe offices, which are up a flight of stairs and not wheelchair accessible to this journalist. The room is modestly furnished with a three-seater sofa, a coffee table, a few surrounding chairs, and two round desks. The musician in me is slightly distracted by (and drawn to) the upright piano in the corner, whilst the only sign of nearby startup life is a rather lonely looking foosball table in the centre of the room.

In addition to the two Kleins, also present are LocalGlobe Partners Suzanne Ashman Blair, who has a background in impact investing; Tara Reeves, who was previously Head of Product at Wonga and co-founded peer-to-peer car sharing marketplace Turo; and George Henry, who worked in venture support at Index. We are joined too by Emma Phillips, Operations Director at LocalGlobe who leads the support provided to portfolio companies post-investment.

We’re really trying to build something here that is not about one or two individuals
— Saul KleinFaced with the unwieldy prospect of interviewing six people at the same time, and determined to wrest back control of the story, I suggest that doing a piece on how LocalGlobe is all about the team could be quite bland. “We’re really trying to build something here that is not about one or two individuals, it really is about the team,” counters Saul Klein. “It probably will sound bland until people actually — which we’re hoping today is the beginning of — take the time to meet the people and hear why we think it means something. It’s not just words on a page”.
“What we wanted to do was build something to last. This is the vision that Saul and I have,” says Robin Klein. “When we left Index, it was, ‘let’s build something that isn’t just about making some investments and hopefully helping some great companies emerge, but let’s build something that is going to last and is enduring beyond me, beyond Saul,’ and so on. An institution, if you like, in its own right, in our peculiar way”.

Partner George Henry frames it as “going beyond the Klein brand”. The French-speaking Belgian worked closely with both Kleins at Index Ventures and says it felt like a very natural move to follow them to LocalGlobe. “I think I was honest as well that I wasn’t joining the family office, I was joining a new institution,” he says.

As a burgeoning institution, it isn’t immediately clear what makes LocalGlobe unusual or peculiar, although a number of things do stand out. The team is “multigenerational,” notes 69 year-old Robin Klein, with Saul Klein in his forties and the other members of the team in their thirties and younger. The firm has also been extremely active over the last year, making an average of two investments per month, something that is attributed to the quality of the companies LocalGlobe is now seeing designer brands clearance.

“The entrepreneurs and their ambition are at a level where we feel very, very comfortable with these companies trying to build very big outcomes, and historically, as you know, because you’ve been covering the space for a very long time, that hasn’t always been the case in the U.K. and Europe,” says Saul Klein.

The firm’s core proposition to the entrepreneurs it courts is that it offers the capital, time and support needed to get to Series A and build the most ambitious business possible. In return, and in an admittedly mixed metaphor, it defines those it is seeking as “surfers capable of riding society’s most important waves,” described as “amazing founders in huge and important markets,” and “black swans capable of being fund returners”. In other words, entrepreneurs that can build the type of companies able to exit for over $750 million and return the entire LocalGlobe fund.

Partner Suzanne Ashman Blair explains that deal-flow typically falls into four buckets: Cold in-bound (“which we do read and get back to people on”), referrals from founders, the VC firm’s wider network, and other VC funds LocalGlobe has co-invested with. “All of those leads go into our Trello,” she says.

“This is also the big difference from five years ago: the quality of the local investment community at all levels,” adds Saul Klein, noting that a third of LocalGlobe’s referrals come from some of the top accelerators including two — Entrepreneur First and early-stage investor Seedcamp — it has directly invested in, along with Telefonica’s Wayra, Cylon, PiLabs, and Techstars Barclays. Angel investors Alex Chesterman, Errol Damelin, Jason Goodman, Taavet Hinrikus, and Brent Hoberman also get special mention.

Given that the VC firm is so active at seed-stage, I posit that LocalGlobe has a disproportionate influence on the startup food chain and therefore the London tech industry’s lack of diversity overall. The “Oxbridge, McKinsey, investment banker” pattern is kind of depressing, I say.

Once we’ve crossed the rubicon then we are all in it and nobody turns around afterwards and says, ‘I told you this was a problem with that company’. That’s totally unacceptable group behaviour
— Robin KleinAshman Blair says it’s partly a “funnel issue” and that, although it has become a lot cheaper to do a startup, it still often requires a period of time when a founder is able to support themselves between jobs. One of the things she says that LocalGlobe believes helps it to get over the “central casting mould” — and something that does perhaps make the VC firm more peculiar than not — is the way its investment decision-making is structured. “We don’t need consensus,” she says. “If one person on our side thinks there is something really interesting about a founder, Saul doesn’t have to be convinced”.
“We have a tag [on Trello] that we call ‘hotly debated’ where we track our investment decisions for companies that don’t get a consensus from everybody around the team,” explains Partner Tara Reeves. “The criteria for making that investment is the same for any investment: is there somebody who is prepared to champion this and feels very strongly, and listens to all of the objections and acknowledges them, but is able to say yes, these are the risks but these are the reasons I feel very strongly that this investment should go forward”.

Once a “hotly debated” investment has been made, the whole LocalGlobe team are expected to get behind the startup, regardless of what doubts any individual team member may have had. “Once we’ve crossed the Rubicon then we are all in it and nobody turns around afterwards and says, ‘I told you this was a problem with that company’. That’s totally unacceptable group behaviour,” Robin Klein says. Instead, it is acknowledged and accepted that there is a rate of failure and that everyone in the team will pick startups that succeed and startups that will fail.

“We look for founder market fit,” adds Henry. “The question of whether the founder is from McKinsey or an investment bank is only relevant in the case of it being helpful for the addressable market. I don’t think we expect for founders to have been through a certain journey”.

Post-investment, LocalGlobe’s operational support kicks in, with the overarching aim to help each startup become Series A-ready. Led by Operations Director Emma Phillips, and with a programme typically lasting up to 18 months, it focuses on the standard startup pain-points of team, market fit, unit economics, and operational setup. Plus, of course, fundraising. But there’s a softer side too, much of which takes place over WhatsApp with each portfolio company given a dedicated group on the popular messaging app.

“It’s a very lonely business starting a company, and all of us have been through it ourselves, and I think the empathy that we have with our founders is fundamental to the relationship,” says Robin Klein. “Understanding what they go through and the doubt, the ups and downs, the constant threat of extermination, the existential threat that they face every day”.

Crunchbase
LocalGlobe
FOUNDED
1999
OVERVIEW
LocalGlobe is a UK-based venture capital firm that focuses on seed and impact investments. Seeding ambitious UK founders since 1999 inc Citymapper, Improbable, Lovefilm, Moo, Tweetdeck, Transferwise and Zoopla. Who's next?
LOCATION
London, H9
CATEGORIES
Impact Investing, SaaS, Venture Capital
WEBSITEhttp://www.localglobe.vc
Full profile for LocalGlobe
“The founders that get the most out of our team are the ones that know it is OK to be vulnerable and do let their guard down,” adds Phillips.

With less than a week to go before a General Election in the U.K., which will see voters choose the next government and who becomes Prime Minister, I observe that the tech industry has been relatively silent this time around. That’s in stark contrast to the run up to the 2015 election when a number of prominent figures in the U.K. startup community signed a public letter calling for the re-election of a Conservative-led government. Neither Klein was a signatory.

“From a political perspective, I don’t think it does the startups we work with any particular good for us to have an overt political opinion or bias,” says Saul Klein. “It’s helpful for the startups we work with that we have access to policy makers regardless of who is in office, whether it’s Labour, a coalition or the Conservatives. Through the 20 years I’ve been doing this, all three have been in office, and in general I sort of feel that regardless of party, tech policy has always been central. All three parties understand that tech is a very positive driver of the economy and socially, so, you know, if I’m asked, regardless of my own political opinions to sort of publicly endorse a party, it’s just not something I’m going to do”.

We definitely had a utopian golden era, but what we get post-Brexit will still be I think substantially better than pretty much any other place
— Saul Klein“I personally don’t think any institution should align itself with a political party because you are accepting all of the policies of that party, some of which you may violently disagree with,” cautions Robin Klein. He says it is better to “be clear about the things you are in favour of,” noting that the VC firm didn’t duck the issue of Brexit and was very vocal that the biggest threat with exiting the European Union is the question of talent and freedom of movement.
“I lived through an era in this country where we had the ‘brain drain’, they called it, because the U.S. was sucking up all our great scientists and so on because they were just so well funded, and it’s just incredible for the opposite to have taken place and all these people were coming in. The ability to place an ad and for somebody to apply and join and they come over the next day and they start working for you, I mean that’s gone. And that to me is, I dunno, a tragedy is too strong a word, but I think it’s damaging to our industry”.

“We definitely had a utopian golden era, but what we get post-Brexit will still be I think substantially better than pretty much any other place you can go and work, unless you wanna go and work in Berlin and Paris,” counters Saul Klein. “Personally I think London and the U.K. are so far ahead of other European tech hubs that however progressive the policies of Macron or Merkel may or may not be, in relation to tech they have a long way to go, and the U.K. is absolutely not going to stand still”.

It would seem that LocalGlobe isn’t standing still either. Not only does the firm have £75 million in fresh capital to deploy, it is currently adding to the investment team, with openings for an additional Partner and Associate, along with a number of other positions.

I also learn that 15 per cent of LocalGlobe’s funding is earmarked for “strategic investments” outside of the U.K. Historically, this has included the U.S, Israel, Berlin, and Paris, and Saul Klein says the firm is also starting to eye up opportunities in Africa, where it has already made three investments, as smartphone penetration increases and the continent makes claim to some of the fastest growing economies in the world.

He and his father were both born in South Africa and Klein makes the point that “London is often a great starting off point for entrepreneurs who want to operate in Africa,” citing local knowledge and the city’s historical ties. He also believes that if and when African tech companies go public they’ll choose to list in London over New York. “It’s a small piece of what we do but we’re definitely starting to see more interesting deal flow,” he says.

My allotted two hours with the LocalGlobe team is nearly up, and — after noting that it is fairly unusual to spend this amount of time with almost the entire personnel of a VC firm — I thank Saul Klein for the opportunity and begin to wrap up the interview. “Don’t you want to talk about the fund? Because I know that was meant to be the news,” he teases with a wry smile. “Of course”’ I reply matter-of-factly, before reminding him that it was the one part of the story I already had: “I mean, what’s there to say? It’s a new fund…”